Suppose the fed conducts an open market purchase by buying $10 million in treasury bonds from acme bank. sketch out the balance sheet changes that will occur as acme converts the bond sale proceeds to new loans. the initial acme bank balance sheet contains the following information: assets – reserves 30, bonds 50, and loans 50; liabilities – deposits 100 and equity 30.

2. (a) suppose the fed decides it needs to pursue an expansionary policy. assume the reserve requirement is 20 percent, and there are no excess reserves. show how the fed would increase the money supply by $2 million through open market operations.

(b) some individuals have suggested raising the required reserve ratio for banks to 100 percent:

(i) what could the money multiplier be if this change were made?

(ii) what effect would such a change have on the money supply?

(iii) how could that effect be offset (in ii above)?

Aeuropean aircraft producer has spent 15 years in developing a new aircraft that would potential threaten long-lasting boeing's dominance (monopoly) in the same class of aircrafts. the new european aircraft gets high marks on all performance measures except noise. because of the noise, the european producers management is concerned that the us government may impose restrictions which would forbid their aircraft to land in some of the american airports. without restrictions the estimated (present discounted) profit would be 125 million usd. with the restrictions the profit would only be 25 million usd. the chances of both outcomes are estimated to be 50-50. management must decide now whether to the cost of redesign program problem and a 60% chance it will fail. should the european aircraft producer start the noise redesign program if they do not have any redesign parts of the aircraft to solve the noise problem. is 25 million usd. there is a 40% chance that redesign will solve the noise additional information than mentioned above? draw the decision tree, indicate probabilities and outcomes of the events * imagine that the company could find out in advance the outcome of the u.s. government's e find the expected value of perfect information about the u.s. government's decision. decision. draw a new decision tree, indicate probabilities and outcomes of the events.